SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): October 22, 1997
M.D.C. Holdings, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-8951 84-0622967
- --------------------- ---------------------- ------------------------
(State or other (Commission file number) (I.R.S. employer
jurisdiction of identification no.)
incorporation)
3600 South Yosemite Street, Suite 900, Denver, Colorado 80237
- ------------------------------------------------------- ------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (303) 773-1100
----------------------------
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 5. OTHER EVENTS
On October 22, 1997, the Company published a News Bulletin reporting
the Company's financial results for the third fiscal quarter ended September 30,
1997, a copy of which is attached to this Form 8-K as Exhibit 99.1.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired
Not applicable
(b) Pro forma financial information
Not applicable
(c) Exhibits
99.1 News Bulletin reporting the Company's financial results for the
third fiscal quarter ended September 30, 1997.
M.D.C. HOLDINGS, INC.
Dated: October 22, 1997 By: /s/ Paris G. Reece III
--------------------------------
Paris G. Reece III
Senior Vice President and
Chief Financial Officer
Exhibit 99.1
NEWS BULLETIN [GRAPHIC OMITTED](R)
M.D.C. HOLDINGS, INC.
FOR IMMEDIATE RELEASE 3600 South Yosemite, Suite 900
WEDNESDAY, OCTOBER 22, 1997 Denver, Colorado 80237
- ------------------------------------------------------------------------------
Contacts: Paris G. Reece III Daniel S. Japha
Chief Financial Officer Director, Investor Relations
(303) 804-7706 (303) 804-7730
(Financial Information) (General Information)
M.D.C. HOLDINGS REPORTS HIGHER THIRD QUARTER EARNINGS
Third quarter earnings per share of $.35, a 30% increase
Record third quarter and nine months revenues
Record third quarter home orders and backlog
Third quarter homebuilding profits of $10.2 million, up over 100%
Third quarter home gross margins of 14.6% vs. 13.8% a year ago
DENVER, Wednesday, October 22, 1997 - M.D.C. Holdings, Inc. (NYSE/PSE:
MDC) today announced income before extraordinary item for the three months ended
September 30, 1997 of $7.3 million, or $.35 per share, compared with $5.6
million, or $.27 per share, for the same period in 1996. Income before
extraordinary item for the nine months ended September 30, 1997 was $16.0
million, or $.78 per share, compared with $14.5 million, or $.68 per share, for
the same period in 1996. Revenues for the third quarter and first nine months of
1997 reached record levels, totalling $266.6 million and $697.7 million,
respectively, compared with $233.3 million and $670.3 million, respectively, for
the same periods in 1996. Operating results for the third quarter and first nine
months of 1997 were reduced by non-cash, pre-tax charges of $3.5 million and
$5.9 million, respectively, compared with $4.3 million and $7.2 million,
respectively, for the same periods in 1996, for the impairment of certain
homebuilding assets.
Larry A. Mizel, MDC's chairman, president and chief executive officer,
stated, "Our strategy of building the right product in some of the most exciting
growth markets in the country has enabled us to produce one of the strongest
quarterly operating performances in our history. Not only did the operating
profits from our core homebuilding operations for the three and nine months
ended September 30, 1997 exceed homebuilding profits for comparable periods in
1996, they more than offset $4.5 million and $9.2 million, respectively, in
non-recurring gains produced by our financial services segment during the
respective 1996 periods. With a significant market share in many of our
homebuilding markets, our improved backlog of home
<PAGE>
[GRAPHIC OMITTED](R)
M.D.C. HOLDINGS, INC.
Page 2
orders, and a stronger financial position, we should be well positioned to
achieve more than 5,100 home closings in 1997."
Net income for the three and nine months ended September 30, 1997 was
$7.3 million and $13.8 million, or $.35 and $.68 per share, respectively,
compared with $5.6 million and $14.0 million, or $.27 and $.66 per share,
respectively, for the same periods in 1996. Net income for the first nine months
of 1997 included an extraordinary loss of $2.2 million from the March 1997
repurchase of $38 million of the Company's 11 1/8% Senior Notes. Net income for
the first nine months of 1996 is net of an extraordinary loss of $.4 million,
resulting from the early extinguishment of debt.
Higher Homebuilding Profits
Operating profits from the Company's homebuilding operations increased
to $10.2 million and $27.5 million, respectively, for the third quarter and
first nine months of 1997, compared with $4.9 million and $18.0 million,
respectively, for the same periods in 1996. These profit improvements primarily
resulted from higher home closings and a significant increase in home gross
margins, which improved to 14.6% for the three and nine months ended September
30, 1997, compared with 13.8% and 13.6%, respectively, for the same periods in
1996. Home sales revenues for the third quarter and first nine months of 1997 of
$259.7 million and $676.7 million, respectively, were the highest for comparable
periods in the Company's history.
Paris G. Reece III, MDC's senior vice president and chief financial
officer, said, "We achieved improved and profitable operating results in the
third quarter and first nine months of 1997 from each of our homebuilding
divisions except Maryland and Northern California. These results were derived
from higher home closings in Las Vegas, Southern California, Virginia and
Arizona as well as substantial increases in third quarter home gross margins,
led by a 330 basis point increase in Las Vegas and increases of 110 to 140 basis
points in Colorado, Phoenix, Virginia and Tucson. These home gross margin
increases reflect a favorable mix of high-margin subdivisions and the benefits
of initiatives implemented in each of our divisions to improve operating
efficiency, control costs and increase rates of return."
Reece continued, "Asset impairment charges in the third quarter of 1997
were required primarily with respect to four subdivisions in Maryland which had
produced little or no home gross profits in recent months. These charges
resulted from pricing, product and incentive changes initiated by new management
in the Mid-Atlantic region to further the Company's aggressive strategy of
accelerating the close out of under-performing subdivisions in that market."
-more-
<PAGE>
[GRAPHIC OMITTED](R)
M.D.C. HOLDINGS, INC.
Page 3
Orders for homes during the third quarter of 1997 increased to 1,370
units, the highest level of third quarter home orders in MDC's history and 21%
higher than the 1,134 orders received in the third quarter of 1996. Orders for
homes during the first nine months of 1997 increased 9% to 4,399 units, compared
with 4,040 orders received during the same period in 1996. Primarily as a result
of the increased home orders, homes under contract (backlog) at September 30,
1997 increased 13% to 2,093 units with an estimated sales value of $382 million,
compared with a backlog at September 30, 1996 of 1,845 units with a sales value
of $326 million.
Financial Services
Operating profits from the financial services segment were $3.0 million
and $6.3 million, respectively, for the three and nine months ended September
30, 1997, compared with $7.1 million and $15.7 million, respectively, during the
same periods in 1996. Operating profits were lower in the three and nine months
ended September 30, 1997 primarily due to (i) a $4.0 million pre-tax gain from
the sale, in September 1996, of the Company's asset management subsidiary,
Financial Asset Management LLC; and (ii) $.8 million and $4.5 million,
respectively, in gains from sales of mortgage servicing in the three and nine
months ended September 30, 1996, related to mortgage loans originated prior to
the January 1, 1996 change in the required accounting for mortgage loans and
mortgage servicing.
The Company's mortgage lending operations originated and purchased
through correspondents $174 million and $452 million, respectively, in mortgage
loans in the third quarter and first nine months of 1997, compared with $144
million and $420 million during the same periods in 1996. Approximately 83% of
the mortgage loans originated and purchased in the third quarter and first nine
months of 1997 were for MDC home buyers.
Strengthened Financial Position and Increased Operating Efficiency
Throughout 1997, the Company has continued to strengthen its financial
position and lower its costs of doing business. At September 30, 1997, compared
with September 30, 1996, the Company's investment in unsold homes under
construction was reduced by almost 27% to $54 million, aggregate indebtedness
was reduced by $11 million to $267 million, and book value per outstanding share
was increased by 9% to $12.62. These improvements contributed to a 10% reduction
in the Company's debt-to-equity ratio at September 30, 1997 to 1.2. The
Company's lower debt levels, combined with lower effective interest rates on the
Company's variable-rate debt, resulted in a 12% reduction in the Company's
corporate and homebuilding interest incurred in the first nine months of 1997,
compared with the same period in 1996. In addition, corporate general and
administrative expenses for the nine months ended September 30, 1997 declined,
compared with the same period in 1996, primarily due to insurance recoveries and
reduced legal
-more-
<PAGE>
[GRAPHIC OMITTED](R)
M.D.C. HOLDINGS, INC.
Page 4
reserves totalling $2.4 million. Corporate general and
administrative expenses for the first nine months of 1996 were reduced by $1.3
million of insurance recoveries in the first quarter of 1996.
MDC is the ninth largest homebuilder in the United States, building
homes under the name "Richmond American Homes" and providing mortgage financing,
primarily for MDC's home buyers, through its wholly owned subsidiary,
HomeAmerican Mortgage Corporation. MDC is a major regional homebuilder with a
significant presence in some of the country's best housing markets. The Company
is the largest homebuilder in metropolitan Denver; among the top five builders
in Riverside County, California, Northern Virginia, suburban Maryland, Tucson
and Colorado Springs; among the top ten builders in Phoenix; and has a growing
presence in Orange, Los Angeles, San Bernardino, Ventura and San Diego Counties,
California and Las Vegas. The Company also builds homes in the San Francisco Bay
Area.
All earnings per share amounts discussed above are on a fully diluted
basis.
Certain statements in this release are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995 and
involve known and unknown risks, uncertainties and other factors that may cause
the Company's actual results, performance or achievements to be materially
different from the results, performance or achievements expressed or implied by
the forward-looking statements. Factors that may impact such forward-looking
statements include, among others, changes in general economic conditions,
changes in interest rates or labor and material costs, government regulations,
consumer confidence and competition.
-more-
<PAGE>
M.D.C. HOLDINGS, INC.
Condensed Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- -------------
ASSETS
<S> <C> <C>
Corporate
Cash and cash equivalents.............................. $ 8,349 $ 7,235
Property and equipment, net............................ 9,431 9,411
Deferred income taxes.................................. 11,123 10,804
Deferred debt issue costs, net......................... 7,039 9,155
Other assets, net...................................... 4,240 3,557
------------- -------------
40,182 40,162
------------- -------------
Homebuilding
Cash and cash equivalents.............................. 4,514 3,393
Home sales and other accounts receivable............... 15,863 10,218
Investments and marketable securities, net............. 3,034 5,159
Inventories, net
Housing completed or under construction.............. 263,891 251,885
Land and land under development...................... 179,196 182,927
Prepaid expenses and other assets, net................. 56,699 57,722
------------- -------------
523,197 511,304
------------- -------------
Financial Services....................................... 79,649 65,837
------------- -------------
Total Assets................................................ $ 643,028 $ 617,303
============= =============
LIABILITIES
Corporate
Accounts payable and accrued expenses.................. $ 17,607 $ 13,519
Income taxes payable................................... 11,232 11,434
Notes payable.......................................... 3,446 3,487
Senior Notes, net...................................... 150,307 187,721
Subordinated notes, net................................ 38,228 38,225
------------- -------------
220,820 254,386
------------- -------------
Homebuilding
Accounts payable and accrued expenses.................. 110,779 114,794
Line of credit......................................... 45,000 11,832
Note payable........................................... 2,926 3,063
------------- -------------
158,705 129,689
------------- -------------
Financial Services....................................... 41,554 19,381
------------- -------------
Total Liabilities.................................... 421,079 403,456
------------- -------------
STOCKHOLDERS' EQUITY
Total Stockholders' Equity........................... 221,949 213,847
------------- -------------
Total Liabilities and Stockholders' Equity.................. $ 643,028 $ 617,303
============= =============
</TABLE>
-more-
<PAGE>
M.D.C. HOLDINGS, INC.
Condensed Consolidated Statements of Income
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1997 1996 1997 1996
------------ ------------ ------------ -------------
REVENUES
<S> <C> <C> <C> <C>
Homebuilding.......................... $ 261,057 $ 222,734 $ 683,748 $ 644,339
Financial Services.................... 5,337 10,346 13,017 25,034
Corporate............................. 224 227 957 956
------------ ------------ ------------ ------------
Total Revenues.................... $ 266,618 $ 233,307 $ 697,722 $ 670,329
============ ============ ============ ============
NET INCOME
Homebuilding.......................... $ 10,231 $ 4,906 $ 27,524 $ 17,983
Financial Services
Mortgage Lending.................... 2,988 3,380 5,903 10,146
Asset Management.................... 45 3,721 414 5,553
------------ ------------ ------------ ------------
Total Financial Services....... 3,033 7,101 6,317 15,699
------------ ------------ ------------ ------------
Operating Profit............... 13,264 12,007 33,841 33,682
Corporate general and administrative
expense, net........................ (1,470) (2,693) (7,237) (7,545)
Corporate and homebuilding interest
expense............................. - - (486) (761) (3,364)
------------ ------------ ------------ ------------
Income before income taxes............ 11,794 8,828 25,843 22,773
Provision for income taxes............ (4,492) (3,225) (9,821) (8,314)
------------ ------------ ------------ ------------
Income before extraordinary item...... 7,302 5,603 16,022 14,459
Extraordinary losses from early
extinguishments of debt, net of
income tax benefit of $1,336 for
1997 and $242 for 1996............. - - - - (2,179) (421)
------------ ------------ ------------ ------------
Net Income........................ $ 7,302 $ 5,603 $ 13,843 $ 14,038
============ ============ ============ ============
EARNINGS PER SHARE
Primary
Income before extraordinary item.. $ .40 $ .30 $ .88 $ .75
============ ============ ============ ============
Net Income........................ $ .40 $ .30 $ .76 $ .73
============ ============ ============ ============
Fully diluted
Income before extraordinary item.. $ .35 $ .27 $ .78 $ .68
============ ============ ============ ============
Net Income........................ $ .35 $ .27 $ .68 $ .66
============ ============ ============ ============
WEIGHTED-AVERAGE SHARES OUTSTANDING
Primary........................... 18,166 18,849 18,236 19,352
============ ============ ============ ============
Fully diluted..................... 21,833 22,462 21,969 22,965
============ ============ ============ ============
DIVIDENDS DECLARED PER SHARE
$ .03 $ .03 $ .09 $ .09
============ ============ ============ ============
</TABLE>
-more-
<PAGE>
M.D.C. HOLDINGS, INC.
Information on Business Segments
(In thousands)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
-------------------------- ---------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Homebuilding
Home sales......................... $ 259,720 $ 220,443 $ 676,674 $ 635,472
Land sales......................... 1,011 2,099 6,256 8,345
Other revenues..................... 326 192 818 522
----------- ----------- ----------- -----------
261,057 222,734 683,748 644,339
----------- ----------- ----------- -----------
Home cost of sales................. 221,912 190,056 577,859 548,974
Land cost of sales................. 744 1,830 5,199 7,785
Asset impairment charges........... 3,500 4,338 5,850 7,208
Marketing.......................... 16,367 14,420 44,467 40,667
General and administrative......... 8,303 7,184 22,849 21,722
----------- ----------- ----------- -----------
250,826 217,828 656,224 626,356
----------- ----------- ----------- -----------
Homebuilding Operating Profit.. 10,231 4,906 27,524 17,983
----------- ----------- ----------- -----------
Financial Services
Mortgage Lending Revenues
Interest revenues.................. 465 944 1,411 2,618
Origination fees................... 1,795 1,528 4,811 4,487
Gains on sales of mortgage
servicing........................ 1,009 1,593 1,560 5,746
Gains on sales of mortgage loans,
net.............................. 1,876 1,545 4,368 3,238
Mortgage servicing and other....... 140 288 419 1,196
Asset Management Revenues
Management fees and other.......... 52 4,448 448 7,749
----------- ----------- ----------- -----------
5,337 10,346 13,017 25,034
----------- ----------- ----------- -----------
General and Administrative Expenses
Mortgage Lending................... 2,297 2,518 6,666 7,139
Asset Management................... 7 727 34 2,196
----------- ----------- ----------- -----------
2,304 3,245 6,700 9,335
----------- ----------- ----------- -----------
Financial Services Operating
Profit...................... 3,033 7,101 6,317 15,699
----------- ------------- ----------- -----------
Total Operating Profit................. 13,264 12,007 33,841 33,682
----------- ------------- ----------- -----------
Corporate
Interest and other revenues........ 224 227 957 956
Interest expense................... - - (486) (761) (3,364)
General and administrative......... (1,694) (2,920) (8,194) (8,501)
----------- ----------- ----------- -----------
Net Corporate Expenses......... (1,470) (3,179) (7,998) (10,909)
----------- ----------- ----------- -----------
Income Before Income Taxes and
Extraordinary Item................... $ 11,794 8,828 $ 25,843 $ 22,773
=========== =========== =========== ===========
</TABLE>
-more-
<PAGE>
M.D.C. HOLDINGS, INC.
Selected Financial Data
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1997 1996 1996
------------- ------------- -------------
BALANCE SHEET DATA
<S> <C> <C> <C>
Stockholders' Equity................................... $ 221,949 $ 213,847 $ 208,824
Book Value Per Share Outstanding....................... $ 12.62 $ 11.83 $ 11.54
Total Debt............................................. $ 267,500 $ 253,346 $ 278,481
Ratio of Debt to Equity............................. 1.21 1.18 1.33
Total Capital.......................................... $ 489,449 $ 467,193 $ 487,305
Ratio of Debt to Total Capital...................... 0.55 0.54 0.57
Total Liquidity........................................ $ 167,093 $ 187,834 157,726
Total Homebuilding Inventories......................... $ 443,087 $ 434,812 $ 458,683
Interest Capitalized in Inventories................. $ 39,819 $ 40,745 $ 40,869
Interest Capitalized as a Percent of Inventories.... 9.0% 9.4% 8.9%
Total Lots Owned....................................... 9,725 10,523 10,784
Total Lots Under Option................................ 5,249 6,698 6,793
Active Subdivisions.................................... 145 152 149
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------- -------------------------------
1997 1996 1997 1996
------------- ------------- ------------- -------------
OPERATING DATA
<S> <C> <C> <C> <C>
EBITDA Computation
Income Before Extraordinary Item.................... $ 7,302 $ 5,603 $ 16,022 $ 14,459
Add:
Income taxes.................................. 4,492 3,225 9,821 8,314
Corporate & homebuilding interest expense..... - - 486 761 3,364
Interest in cost of sales..................... 7,529 6,066 20,357 18,945
Other fixed charges........................... 195 255 582 977
Depreciation and amortization................. 4,052 3,026 10,588 8,770
Asset impairment charges...................... 3,500 4,871 5,850 7,741
------------- ------------- ------------- -------------
Total EBITDA........................................... $ 27,070 $ 23,532 $ 63,981 $ 62,570
============= ============= ============= =============
Fixed Charges Incurred................................. $ 6,884 $ 7,837 $ 20,774 $ 23,938
Ratio of EBITDA to Fixed Charges....................... 3.93 3.00 3.08 2.61
Ratio of EBITDA to Interest Incurred................... 4.05 3.10 3.17 2.72
Homebuilding and Corporate SG&A as a Percent of Home
Sales Revenues....................................... 10.2% 11.1% 11.2% 11.2%
Interest Data
Interest Incurred................................... $ 6,689 $ 7,582 $ 20,192 $ 22,961
Interest Capitalized................................ $ 6,689 $ 7,096 $ 19,431 $ 19,597
Interest in Cost of Sales as a Percent of Home Sales
of Home Sales
Revenues........................................ 2.9% 2.8% 3.0% 3.0%
</TABLE>
-more-
<PAGE>
M.D.C. HOLDINGS, INC.
Homebuilding Operational Data
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ----------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Home Sales Revenues (In thousands)............... $ 259,720 $ 220,443 $ 676,674 $ 635,472
Average Selling Price Per Home
Closed (In thousands)......................... $ 180.9 $ 175.1 $ 178.4 $ 176.2
Home Gross Margins............................... 14.6% 13.8% 14.6% 13.6%
Orders For Homes, Net (Units)
Colorado.................................... 490 405 1,565 1,483
Mid-Atlantic................................ 158 246 774 898
California.................................. 257 185 750 634
Arizona..................................... 349 237 964 843
Nevada...................................... 116 61 346 182
------------ ------------ ------------ ------------
Total................................... 1,370 1,134 4,399 4,040
============ ============ ============ ============
Homes Closed (Units)
Colorado.................................... 469 465 1,259 1,400
Mid-Atlantic................................ 302 262 806 657
California.................................. 229 191 602 594
Arizona..................................... 314 261 824 764
Nevada...................................... 122 80 301 191
------------ ------------ ------------ ------------
Total................................... 1,436 1,259 3,792 3,606
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
September 30, December 31, September 30,
1997 1996 1996
------------ ------------ ------------
<S> <C> <C> <C>
Backlog (Units)
Colorado.................................... 882 576 741
Mid-Atlantic................................ 389 421 516
California.................................. 308 160 215
Arizona..................................... 371 231 313
Nevada...................................... 143 98 60
------------ ------------ ------------
Total................................... 2,093 1,486 1,845
============ ============ ============
Estimated Sales Value (In thousands).... $ 382,000 $ 261,000 $ 326,000
============ ============ ============
</TABLE>
###
